Correlation of coming limit price with order book in stock markets

Details Correlation of coming limit price with order book in stock markets Correlation of coming limit price with order book in stock markets

2007-02-04

arxiv.org/abs/physics/0702029v1

Physics

Data Analysis, Statistics and Probability

8 pages, 7 figures

Scientific paper

10.1016/j.physa.2007.04.091

We examine the correlation of the limit price with the order book, when a limit order comes. We analyzed the Rebuild Order Book of Stock Exchange Electronic Trading Service, which is the centralized order book market of London Stock Exchange. As a result, the limit price is broadly distributed around the best price according to a power-law, and it isn't randomly drawn from the distribution, but has a strong correlation with the size of cumulative unexecuted limit orders on the price. It was also found that the limit price, on the coarse-grained price scale, tends to gather around the price which has a large size of cumulative unexecuted limit orders.

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